REUTERS/K. Sathya Narayanan

Gold powers towards 7-year peak as investors rush for safety

January 6, 2020

“Gold prices were near a seven-year high on Monday as escalating tensions between United Stated and Iran attracted safe haven demand, while palladium rose past a key $2,000 level to hit a new record peak. Spot gold rose 1.6% to $1,575.70 per ounce as of 1320 GMT, putting it on course for its biggest one-day jump in more than four months. Earlier in the session it hit $1,579.72, its highest since April 2013. U.S. gold futures gained 1.7% to $1,578.20.

‘It is more of anticipation of what could happen or what might happen (between U.S. and Iran), which is now reflected in the market. Basically, the uncertainty that we don’t know what is going to happen,’ said Julius Baer analyst Carsten Menke. ‘If this issue is something which remains in the political area, like back and forth accusations and threats, then we should not have a lasting impact on gold.’

Bullion is often seen as an alternative investment during times of political and financial uncertainty. Gold prices have gained about 3% since the U.S. killing of a top Iranian military commander on Friday has heightened fears of a wider Middle East conflict, prompting investors to flee from risky assets.”

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CNBC/Fred Imbert

Gold surges to more than 6-year high on geopolitical turmoil, inflation fears

January 6, 2020

Gold Surges to 6 Year HighGold surged on Monday to its highest level in more than six years as investors fled riskier assets such as stocks amid rising tensions between Iran and the U.S. Futures for February delivery were up 1.7% at $1,578.80 per ounce and hit a high of $1,590.90 per ounce. That’s the metal’s highest level since April 2, 2013, when it traded at $1,604.30 per ounce. Gold was also headed for its ninth straight day of gains. ‘This is a bullish development, and while stretched, should lead to higher gold prices in the days/week ahead,’ said Mark Newton, managing member of Newton Advisors. He added that the precious metal could reach a range between $1,650 and $1,700 per ounce in the near term.

Gold prices have been on a tear over the past two sessions after President Donald Trump authorized the assassination of Qasem Soleimani, a top-ranking Iranian military official, in Baghdad. On Friday, gold rallied 1.6%. Soleimani’s assassination led Iraq to expel foreign troops from the country while Iran vowed to retaliate against the U.S. The Iranian regime also said Sunday it would not abide by the uranium-enrichment limits set by the 2015 nuclear deal.”

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MARKET WATCH/Shawn Langlois

Stocks could see a double-digit drop in the coming months, warns Wells Fargo

January 6, 2020

Stocks Double Digit Drop“Even as geopolitical tensions continue to ratchet up, there’s much to be bullish about in the stock market in the New Year — maybe too much, according to Chris Harvey, the head of equity strategy at Wells Fargo Securities. ‘There’s a lot of things to like. Rates are lower, credit spreads are tighter, the Fed has been accommodative, we’ve got some sort of resolution with trade and tariff and sentiment has improved greatly,’ Harvey explained to Bloomberg in a recent podcast. ‘And that’s what we don’t like.’

In other words, when everything starts turning positive and expectations go higher, that’s exactly when investors should be worried.  But they don’t seem to be. ‘Typically, when people are a little bit more, what would we say, greedy, as opposed to fearful, it’s not always a great time,’ he said, with a nod to Warren Buffett’s oft-cited market mantra. ‘With expectations so much higher, we’re just worried that things can change and change rather quickly.’ …Bullishness was in short supply in Friday’s trading session, as investors reacted to the U.S. airstrike in Baghdad that killed a top Iranian military commander. Oil prices jumped, while the Dow, S&P 500and Nasdaq Composite all closed lower. There’s no rebound taking shape on Monday, with futures pointing to a lower open.”

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Oil spikes above $70, its highest since September, amid mounting Middle East tensions

January 6, 2020

Oil Spikes Amid Mid East TensionsOil surged more than 1% in early trading on Monday morning as tensions in the Middle East escalated over the weekend, pushing Friday’s gains into a second week. Brent crude jumped 1.5%, to as high as $70.74 per barrel, its highest price since September. West Texas Intermediate gained 1.2%, to $63.79 per barrel, its highest since April. Tensions in the Middle East have mounted since the death of Iranian Maj. Gen. Qassem Soleimani late Thursday. Over the weekend, Iran said it would withdraw from the 2015 nuclear deal. On Sunday, US President Donald Trump tweeted that the US would impose sanctions on Iraq if US troops are forced to leave.

Since this conflict started, Brent crude has gained $4, Hussein Sayed, a chief market strategist at FXTM, wrote in a note early Monday. The price will likely climb as the conflict continues and could weigh on stocks as well, he said. ‘At $70-80 a barrel, the global economy is not likely to feel much impact from this raise in prices, but as we get closer to $100 there will be severe consequences,’ Sayed wrote, adding that it could trigger ‘steep selloffs’ in equity markets … Gold has also gained since last week. On Monday, the precious metal hit its highest price since 2013 as investors piled into the safe-haven asset.”

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BLOOMBERG/Nick Wadhams and David Wainer

Qassem Soleimani Killing Leaves Trump’s Middle East Strategy in Tatters

January 5, 2020

Middle East Strategy“U.S. President Donald Trump and his top aides spent the weekend arguing that the killing of Iranian General Qassem Soleimani would deter future attacks and make the Middle East safer. Instead, U.S. policy in the region seems to be going in the opposite direction of what Trump has long promised — with more U.S. troops going in, not fewer; an Iran defiant, not cowed and broken by sanctions; and regional allies giving only lukewarm support to Trump’s airstrike instead of rallying around it. Economic costs of the strike are also mounting: oil surged above $70 a barrel on Monday and equities around the world extended losses. Havens climbed, with gold rising to the highest in more than six years.

The political backlash came quickly, as the U.S.-led coalition against Islamic State was forced to suspend operations and Iraq’s parliament called on Sunday called for U.S. troops to withdraw. Trump responded by saying Iraq could face sanctions and would have to ‘reimburse’ America. Iran said it would abandon limits on uranium enrichment put in place as part of a 2015 nuclear agreement that Trump abandoned in 2018. U.S actions have “made an already volatile situation much more dangerous,” said retired Army Lieutenant Colonel Daniel Davis, a senior fellow at Defense Priorities who favors a U.S. troop withdrawal from Iraq. ‘If you paid any attention to Iran in the last 40 years you know they will never buckle to that kind of pressure. It’s just the opposite.’”

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It’s White-Knuckle Time for Buyers of Riskier Corporate Loans

January 6, 2020

Riskier Corporate Loans“The market for low-rated corporate loans has suffered sharp declines in recent months, a sign of growing aversion to earnings shortfalls or other strains at indebted companies. In the U.S. at the start of December, some 2.5% of leveraged loans were trading at less than 70% of face value, the most since September 2016, according to S&P Global Market Intelligence’s LCD, the loan market research service.  Analysts and investors blame the loose credit standards that characterized the market in recent years, encouraged by strong demand from yield-hungry investors. The hunt for yield also fed a boom in new issuance of structured loan funds known as collateralized loan obligations, or CLOs, which have been the biggest group of lenders in recent years.

But investors are shying away from such loans at any sign of trouble, including those deemed ‘covenant lite’ for their scant investor protections, which is sparking steep falls in the prices of loans to firms—particularly when they fail to hit earnings targets. ‘In the absence of covenants, loans should trade down quicker,’ says Alexander Ohl, head of structured credit at Union Investment in Germany. In Europe, especially, where loan markets are smaller, less transparent and less liquid than in the U.S., loan values can drop very rapidly once they go below the equivalent of 80 cents on the dollar, Mr. Ohl says.”

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